Santander is up next with a $1.05 billion subprime auto loan securitization.
The deal, Santander Drive Auto Receivables Trust 2014-4, is the second subprime auto loans securitization to be announce this week. CPS is also marketing a $273 million subprime deal this week.
Santander has mandated Bank of America Merrill Lynch as lead manager on the deal.
Standard & Poor’s has assigned preliminary ratings to the deal. The capital structure will offer three AAA’ rated, class A notes. The class A-2A and A-3 tranches will be offered as fixed-rate bonds maturing on Jan. 16, 2018 and Sept 17, 2018, respectively. The notes have credit enhancement at 45.7% for the A-2A notes and 31.4% for the A3 notes.
The class A-2-B notes are structured as floating rate notes that are due Jan. 16, 2018. The notes have credit enhancement at 36.68%.
At the junior level, the capital structure will offer notes rated from AA’ to BB+’, according to the S&P presale report. The class B notes rated AA’ are due May 15, 2019. The class C notes rated A’ are due Nov.16, 2020. The class D notes rated BBB+’ are due Nov. 16, 2020 and the class E notes rated BB+’ are due Jan. 18, 2022.
Santander was last in the market with a subprime deal in June. SDART 2014-3 sold $1.25 billion worth of securities. The $225.75 million class A2A notes priced at a spread of 28 basis points over the eurodollar synthetic figure (EDSF), while the $168 million class A2B notes priced at 28 basis points over one-month LIBOR. Both classes have a weighted average life of 0.91 years.
The 1.76 year class A3 notes with a weighted average life of 1.76 years priced at 32 basis points over EDSF.
By comparison SDART 2014-4 has a weaker loan pool. For example, the weighted average loan-to-value ratio increased to 114.01% from 112.00%. The pool also includes more, longer dated loans. According to the presale receivables with original terms of 61-75 months increased to 89.82% from 84.4%.
The weighted average internal credit score for receivables with originals terms of 73-75 months decreased to 531 from 561. S&P also noted that the weighted average LTV for these receivables increased to 105.42% from 104.62%.
But S&P stated in the presale that despite the weaker credit characteristics the deal is structure with “sufficient room” to accommodate any losses associated with the weaker attributes of the 2014-4 pool.
“We had recently gone up significantly in our loss expectation on the previous 2014-3 deal to 15%-16% from 13%-14% mainly because of the increased loss rate on SCUSA's managed portfolio, deteriorating static pool performance in the recent vintages, and the 2014-3 pool's weaker collateral mix. The current origination static pool data and securitization performance continue to indicate that this range is appropriate,” the report states.